Meta-Blog

SEARCH QandO

Email:
Jon Henke
Bruce "McQ" McQuain
Dale Franks
Bryan Pick
Billy Hollis
Lance Paddock
MichaelW

BLOGROLL QandO

 
 
Recent Posts
The Ayers Resurrection Tour
Special Friends Get Special Breaks
One Hour
The Hope and Change Express - stalled in the slow lane
Michael Steele New RNC Chairman
Things that make you go "hmmmm"...
Oh yeah, that "rule of law" thing ...
Putting Dollar Signs in Front Of The AGW Hoax
Moving toward a 60 vote majority?
Do As I Say ....
 
 
QandO Newsroom

Newsroom Home Page

US News

US National News
Politics
Business
Science
Technology
Health
Entertainment
Sports
Opinion/Editorial

International News

Top World New
Iraq News
Mideast Conflict

Blogging

Blogpulse Daily Highlights
Daypop Top 40 Links

Regional

Regional News

Publications

News Publications

 
In defense of health savings accounts
Posted by: McQ on Tuesday, January 24, 2006

Ezra Klein, in an effort to preemptively spin President Bush’s anticipated State of the Union health care subject, gives us a rather sloppy analysis of the Health Savings Accounts (HSA) :
This is a rethink of the entire health care system: no more risk pooling; instead, you sock away cash in tax-advantaged accounts, spending it only when you get sick. So no (or very low) premiums. But when you fall ill, there'll be no insurance company defraying the costs, not until you've spent $10,000 or so.

The idea here is simple. Conservatives believe Americans have too much health insurance, that they spend heedlessly and wastefully on care, procedures, and medications they would simply forego if insurance plans didn't pick up the tab. Ergo, HSA's, which end risk pooling, forcing care to come directly from pockets. Newly responsible for their medical bills, consumers will be spurred by the Magic of the Market to make smarter decisions, show more prudence, lead healthier lifestyles, smile more often, and smell springtime fresh. It's gonna be awesome.
First let’s deal with the reality of HSAs as they’re outlined here:
A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.

You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.
Point one, it is an alternative, not a replacement. Your choice at this point. If you and your employer agree that employee coverage is the better option, fine, but be prepared to pay more over the long run. And be prepared to suffer through more and more restrictions as the coverage continues to climb in price. Since you won’t be able to shop around, you’re stuck with your insurance carrier’s network or nothing.

The HSA on the other hand gives you the freedom to go where you wish and to shop your health care dollar around. As women learned long ago, it’s amazing the savings you can glean by shopping around (now if we could only teach them not to shop for as much it would be great indeed). Also note the acronym HDHP. That’s an insurance policy which provides catastrophic health coverage.

There is also nothing stopping you or anyone from negotiating a percentage match from your employer for an HSA. In fact, I would guess that would become a standard negotiating point for employment. Put in a tax defrayed account, it’s a no-brainer, and any employer worth his salt would rather put a few bucks in your account and end his responsibility in the health care realm instead of having to both pay for and manage a health insurance account.

And Klein’s "$10,000 deductible" is also misleading as well:
You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that. Of course, your HSA is available to help you pay for the expenses your plan does not cover.

For 2005, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,000 (self-only coverage) or $2,000 (family coverage). For 2006, the amounts increase to $1,050 and $2,100, respectively. The annual out-of-pocket (including deductibles and co-pays) for 2005 cannot exceed $5,100 (self-only coverage) or $10,200 (family coverage). For 2006, these amounts increase to $5,250 and $10,500, respectively. HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.
First and foremost, the minimum deductible for a family is $2,100, not $10,000. Secondly, HDHP is indeed the beneficiary of pooling and it is a network health-care insurance instrument. The difference is you are only pulled into the network when you get into high-dollar expenses for unexpected medical care of a more critical nature. Until then, you remain in charge, through your HSA, of your routine medical care. What that means is you are now treating this as you do all of your other insurance products. You pay for the routine, they pay for the catastrophic and your insurance cost reflects that difference with lower premiums … much lower.

So HSAs do indeed make sense. And Klein agrees ... to a point:
At least if you're healthy. Because what HSA's really do is separate the young from the old, the well from the sick. Currently, insurance operates off of the concept of risk pooling. Since health costs tend to be unpredictable and illness isn't thought a moral failing, we all pay a bit more than we expect to use in order to subsidize those who end up needing much more than they ever thought possible. The well subsidize the sick, the young subsidize the old, and we all accept the arrangement because one day we will be old, and one day we will be sick, and no one wants to shoulder that alone.
Well no, they don’t at all separate the young from the old or the well from the sick, because each of those categories would also have an HDHP which “operates off the concept of risk pooling”. What it doesn’t do is figure in the treatment and payment of routine medical care into that risk pool. That’s left to you to do with your HSA. That means the HDHP costs less than traditional bumper-to-bumper medical insurance.

On to the next Klein myth:
Nor will HSA's cut down on unnecessary care. A famous RAND study looked into usage of these plans and found that patients did indeed use a bit less care, but they had no way to separate necessary care from unnecessary care. So instead of foregoing useless procedures, they simply neglected their hypertension (for example). Long-term, that means more strokes and heart attacks, which in turn cost the system orders of magnitude more than blood pressure medications and regular check-ups. Save a penny today, pay a pound tomorrow.
Except as noted above, “ HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.”

Or said another way, once the market for HSAs is established a number of supplementary insurance products will likely become available. I would imagine being able to choose between paying for insurance that covers every conceivable thing I’d like covered to that which covers only the bare minimum if I so choose. And, as with all insurance products of any type, they’ll all take advantage of ‘risk pooling’. What that means is, just as “Medigap” insurance products exist to supplement Medicare insurance, the same will happen with HSA and HDHP. Want preventive care? Buy a no deductible supplementary insurance product that covers it. Choice, what a concept, eh? Klein, on the other hand, would rather force you to use his product, and reading his piece, it doesn’t take an incredible imagination to figure out what that would be.

So why the antagonism toward HSAs?
But HSA's slice right through this intergenerational, redistributionist arrangement: they're a great deal for young, healthy folks because they don't force subsidization. Just don't get sick. And if you're already sick, don't think you can hide by remaining in traditional insurance plans: when the healthy rush towards HSA's, older plans will hold only the ill, and insurance companies will send premiums skyrocketing to recoup the difference.
[Continued below the fold]
 
Sure, and Medicare will be dismantled tomorrow. Worried about the old and infirm? We already have a monstrosity of a system in place which now serves them. Want to extend it a little to cover those disabled by illness? It already does so. But let’s be honest about what Medicare is if we’re going to extend it. It’s a welfare program and as such, should be extended only to those who need it, and that doesn’t include all of the elderly.

If you make gradual shift to HSAs you use Medicare as a means tested welfare safety net for those who are unable, for whatever reason, to pay for their own care. But you make those who can afford their own medical care do so. That should appeal to someone like Klein who, it seems, thinks the rich get too many bennies as it is. And my guess is, in the long run, health care costs would come down.
The other reason Klein doesn’t like HSAs?
But that's not to say HSA's are useless. They're not. What they achieve is massive, large-scale cost-shifting, generally from employer to employee. Where businesses used to pay for insurance (and thus for treatment), now they'll simply help employees found HSA's and let them pay their own health costs. And that's really what this push is about. Businesses don't like paying for health care. The Bush administration, as always, heard and heeded the corporate complaints, and is set to propose a policy agenda that'll help employers wiggle out of insurance costs. But someone, always, is left holding the bag, and if businesses let go of it, their employees will have to pick up the slack. For the lucky, healthy ones, the changeover won't affect them much; it may even leave them better off, at least for awhile. But for the old or the ill (all of us, eventually), costs will skyrocket.
Yes, God forbid, it may help businesses. And we all know that’s an anathema to the left. We can’t let these companies with deep-pockets off the hook, can we? Of course, while Klein can recognize what he calls “cost-shifting” in which the onus of paying for medical care moves from the employer to the employee, he’s apparently blind to the cost-shifting which exists now when employers withhold money which would have been paid in salary to instead pay for the employee’s health care. If he thinks those costs aren’t a calculated part of every salary package involving health insurance, he hasn’t been paying attention.

All in all this is a pretty poor job by Klein who’s usually better than this. Rather disappointing to say the least, but pretty typical of the level of argument the left usually mounts when it comes to a discussion of HSAs specifically and health care in general. Scare tactics and emotional arguments ...
Bush wants to bring about the end of risk pooling, the end of health security. The question voters will have to ask is if they think their lives, and bank accounts, need a massive infusion of instability.
... with little or no grounding in fact.

HSAs may not be the cure-all for what ails us as concerns the cost of medical care but they bring some important pluses to the dance. For instance they take care of the problem of portability and preexisting conditions, a couple of problems faced by millions of Americans now and very important to any reform. Klein barely even addresses this important subject, preferring a metaphorical hand-wave to a serious discussion.

Because HSAs are private accounts, it takes the employers out of the health care management business, something which is very costly and time consuming. That doesn’t, of course, preclude employer participation in your HSA as an employee perk, or perhaps helping pay the premium on your HDHP. My guess is these would become standard recruiting perks which employers will use to attract employees, just as they use matching funds for 401ks as a recruiting tool now.

HSAs put the consumer back in charge of his health care. You choose, you decide, you make the value determination. Putting the consumer in charge is one of the best ways to again get costs under control, and that is precisely what HSAs do. Once consumers begin to shop the market, and pay in cash, medical providers will do what is necessary to attract their business. Its obviously to their benefit to do so.

HSAs also use insurance products properly and thus consumers will see their insurance rates drop drastically. Just as we don’t have insurance to fill the tank on our car or paint our house, there’s no reason we should have insurance to pay for our routine medical needs. If you have a cold and consult a doctor you pay for it from your HSA account. However, should you be unfortunate enough to contract a catastrophic disease or suffer a catastrophic injury, your HDHP insurance then kicks in and pays for your treatment.

HSAs are, in fact, a terrific way to transition health care to a more consumer and thus free-market based orientation. That promises to lower health care costs, streamline treatment, lower the cost of supplementary insurance, solve the portability problem and, with the consumer back in charge, refocus health care in general.
 
TrackBacks
Return to Main Blog Page
 
 

Previous Comments to this Post 

Comments
consumer back in charge
This will be the problem. People aren’t capable of taking care of themselves, remember? We can’t save our own money, we can’t decide which plan best suits our needs, and we can’t be expected to pay for our own non-extraordinary health requirements.

Despite my sarcasm, there actually is some truth to what I wrote. There are a lot of people who expect a nanny to care for their needs. Are these people going to fear that if others opt out of the tradition system then their own rates will increase?

 
Written By: JWG
URL: http://
Despite my sarcasm, there actually is some truth to what I wrote. There are a lot of people who expect a nanny to care for their needs. Are these people going to fear that if others opt out of the tradition system then their own rates will increase?
Then they can stay with the "old" system. That’s the wonderful thing about choice; you can choose not to be free, sort of like Ulysses binding himself to the mast. It’s when we don’t have the choice to make our own decisions that real troubles begin ... but now I’m preaching to the choir.
 
Written By: MichaelW
URL: http://
Then they can stay with the "old" system.
But if there’s fear that if too many people leave that system then it will no longer function, then people will fight against the new system.
 
Written By: JWG
URL: http://
But if there’s fear that if too many people leave that system then it will no longer function, then people will fight against the new system.
That’s a good point. Look at some of the opposition to school vouchers, they make the same argument.
 
Written By: Steverino
URL: http://steverino.journalspace.com
Well since health care is presently employer based (and I’m sure unions will have something to say about any changes) it becomes an employer decision in the long run.

What that means is some (in fact I’d guess many) will see the benefit of unburdening themselves from the cost of managing a health care insurance system and offer incentives to their employees to change over to HSAs (most likely with a drop dead date for final change-over). Those incentives may be in the form of paying an certain amount into their account for the first year or so (which, I’d guess, would be infinitely cheaper than running an insurance program) and help them sign up with an HDHP.

The market will gain experience with HSAs, success and/or horror stories (or both) will begin to surface, adjustments will be made and as it enjoys more and more success and more data becomes available the fear will lessen as will the resistance.

It’s simply a matter of having the political will to do so. My confidence in the market (given HSAs aren’t regulated to death with all kinds of bureaucratic obstacles and restrictions included in the reform) is such that I think it would prove it’s viability in a relatively short time.
This doesn’t have to be an overnight thing.
 
Written By: McQ
URL: http://www.qando.net/
There are two distinct issues that need to be considered in the discussions of our health care system. First, costs need to be brought under control. Health care costs have increased significantly faster than the non-health care rate of inflation for 40 years (since the adoption of Medicare and Medicaid). Obviously, something needs to be done.

Second, we need to maintain or improve the health of Americans and, in particular, the performance of our health care system. There’s obviously a “bang for the buck” problem in health care and there’s an explanation for it proposed by Milton Friedman called “Gammon’s Law”. I’ve posted on it before.

I have no confidence that HSA’s will address either of these problems because I think the idea is based on false premises, namely that the problems with our health care system are due excess demand rather than inadequate supply (caused by government and the desire, frankly, of health care providers, pharmaceutical manufaturers, and others to harness the power of government to reduce competition). But they’re worth a try.
 
Written By: Dave Schuler
URL: http://www.theglitteringeye.com
The success of a program based around HSAs depends in large part on the availability of information regarding medical choices and consumers becoming educated about that information and their choices. In today’s environment, there is relatively little information available about quality of care. Even if such information were to become more readily available, I question whether a majority of consumers will be able to understand it at a level on which they will be able to make informed decisions. There was an article in the NY Times this weekend about ionic air purifiers and how, despite repeated testing and reports that they really don’t work, sales keep increasing. I doubt people will do better evaluating medical services.

I’m also not convinced that the overall cost will go down. In today’s market, insurance companies are very motivated to hold down costs and to drive their insured to lower cost providers. It’s not at all clear to me that individual consumers will have more success in driving down prices through competition than insurance companies have.

I think Klein’s point about deferring treatment has more validity than you give it. I’m thinking of my friends who don’t have dental insurance. They tend to ignore the routine cleanings and exams and typically only go in when there is a more serious problem. Is the overall cost more or less? I think you will see a similar phenomenon with HSAs. People will just think there are better uses for the money than routine exams—especially when the exams or treatments are slightly unpleasant. If I have to pay for my own colonoscopy, it would take some serious discipline to get them at the recommended intervals.

 
Written By: Steven Donegal
URL: http://
I believe HSAs coupled with the trend of placing clinics, nurse practioners, in retail settings could bring down the rate of the uninsured and the cost of routine preventative care. (Getting Your Health Care at Walmart) If your clinic could give you a flu shot on Saturday morning for $34, why book an appointment with your doctor at an inconvenient time for a flu shot priced at $76.

I don’t understand why those who are in favor of universal health care don’t embrace the HSA approach as an interim approach.
 
Written By: katy
URL: http://
My biggest issue with HSAs and High-Deductible plans is with the companies administering them. Insurance companies are stuck in the mode of thought where consumers do not matter, and where all interaction occurs directly between the company and a company representative.

I should be able to go to an insurers website and gather information about a high-deductible plan, read the full terms, and get an estimate. I should be able to at least find a phone number listed somewhere to speak with a service rep to answer whatever questions I may have. I havent found a single insurer that offers these plans that does this.

I’ve looked at many of the HSA policies that are quoted from ehealthinsurance.com, from various major insurance companies. When I want to contact the company to ask any questions, or get any further information, before actually submitting an application... I hit a brick wall.

Insurers need to seriously modify their business practices in order to make these plans more accessible. They need to start public awareness campaigns to teach people the possible benefits of these plans.

The HSA+High-Deductible system is one that has alot of promise, but requires insurers to get into a customer oriented mindset in order to be successful. This dosent seem to be something that they are capable of.
 
Written By: Rosensteel
URL: http://
I think Klein’s point about deferring treatment has more validity than you give it. I’m thinking of my friends who don’t have dental insurance. They tend to ignore the routine cleanings and exams and typically only go in when there is a more serious problem. Is the overall cost more or less? I think you will see a similar phenomenon with HSAs.
Steve, at some point you have to either come down on the side of personal responsiblity or you have to decide it is the business of government to take care of everyone.

I have friends with dental insurance who don’t take advantage of the routine cleanings. What’s the difference?

Either people should make choices and pay for their decisions out of their pocket or we decide they don’t have the option to make a choice (other than that I’ve just outlined about not using their insurnce for routine care) and we all pay for their decisions collectively.

Perhaps, given that it will come out of their pocket vs. yours, there might eventually be an incentive for them to take better care of themselves through using routine care. One fat bill usually does it for most folks.
 
Written By: McQ
URL: http://www.qando.net/
Insurers need to seriously modify their business practices in order to make these plans more accessible. They need to start public awareness campaigns to teach people the possible benefits of these plans.
Can’t disagree with that Rosensteel. And, if this becomes a serious program, they’ll have too to survive.
 
Written By: McQ
URL: http://www.qando.net/
Steve, at some point you have to either come down on the side of personal responsiblity or you have to decide it is the business of government to take care of everyone.
I guess that’s one way to look at it, but I thought we were talking about how to reduce overall healthcare costs and improve availability of treatment, not debating a philosophical point. You think HSAs through market mechanisms will make this happen. I am skeptical, because I don’t think that generally people will be willing to put the time and energy into to make fully informed choices and I think that providers and insurers will take advantage of them. I doubt for example that most people really have any idea of what’s actually covered in their auto or fire insurance policies. If people shop at all, they shop price, even though there can be significant differences not only in coverage but in claims payment performance by the insurers. So I don’t think it will be any different in the HSA market. And in the area of people’s health and life and death issues, I think we as a society have a great interest in people getting the resources they need. There is, I will admit, great surface appeal in taking the position that each of us is personally responsible for our choices and should reap both the benefits and burdens of those choices. However, I believe there are some fundamental areas where the overall cost to society will be higher, both in quality of life and in economic terms, if society does not offset some of the burden, and health care to me is one of those areas.
 
Written By: Steven Donegal
URL: http://
The best staement on health care and the necessity of HSA’s is P. J. O’Rouke’s statement, "If you think health care is expensive NOW, wait until its free." Simply put users MUST begin to pay a non-trivial share of their health care bills, otherwise the cost of health care will bankrupt the nation.

Imagine if McDonalds was paid for via a third party payer. Do you think McDonald’s food would be cheaper or more expensive than now? How is it that food is so cheap in the US? Because we have food insurance or because of competition and market pricing and niche marketing?

Everything that has been said about HSA and their drawbacks has merit, but the indisputable fact is that until YOU begin to bear the cost of your own health care there will be little incentive to rein in costs.
 
Written By: Joe
URL: http://
"However, I believe there are some fundamental areas where the overall cost to society will be higher, both in quality of life and in economic terms, if society does not offset some of the burden, and health care to me is one of those areas."

You could try naming those areas to see if anyone agrees, or if holes are found in your assumptions.

Yours, TDP, ml, msl, & pfpp
 
Written By: Tom Perkins
URL: http://
I’m predisposed to liking HSA’s but I’m wondering how the transition affects those with pre-existing conditions - unless I’ve missed it here. For the healthy this plan does solve the hugely important problem of portability but, what about those in traditional plans who cannot migrate? It seems to me that there will eventually be a problem of adverse selection in the old system unless there is some form portability mandate in the new law.

I’m not up on the details of the proposal. Any thoughts
 
Written By: DAve Budge
URL: http://davebudge.com
I guess that’s one way to look at it, but I thought we were talking about how to reduce overall healthcare costs and improve availability of treatment, not debating a philosophical point.
So you believe this has to be considered in a philosophical vacuum? The debate is as much philosophical as it is practical.
You think HSAs through market mechanisms will make this happen. I am skeptical, because I don’t think that generally people will be willing to put the time and energy into to make fully informed choices and I think that providers and insurers will take advantage of them.
Right, or philosophically, you believe people are incapable of taking care of themselves and feel compelled to do it for them (or at least provide a mechanism to do so) and I perfer the philosophy which requires people take responsbility for their own lives. It is these two opposing philosophical outlooks which have you viewing HSAs skeptically and me viewing them positively.
I doubt for example that most people really have any idea of what’s actually covered in their auto or fire insurance policies.
Who’s problem is that Steve? And how can you ’fix’ it? And why would you? That’s their business and their responsiblity.
If people shop at all, they shop price, even though there can be significant differences not only in coverage but in claims payment performance by the insurers.
Really? That may be where you start when you learn to shop, but anyone with experience learns to shop value. And you can’t learn that if your not allowed to do it. Again a personal responsiblity thing.
So I don’t think it will be any different in the HSA market. And in the area of people’s health and life and death issues, I think we as a society have a great interest in people getting the resources they need.
Well given your premise, your conclusion would be correct. I just don’t agree with your premise. I think that once people learn to again take care of their own medical needs (as they did prior to about 70 years ago ... lord how did we manage to survive before then?) they’ll do just fine.
There is, I will admit, great surface appeal in taking the position that each of us is personally responsible for our choices and should reap both the benefits and burdens of those choices. However, I believe there are some fundamental areas where the overall cost to society will be higher, both in quality of life and in economic terms, if society does not offset some of the burden, and health care to me is one of those areas.

And we’re back to philosophy. We always reap benefits and burdens with our choices, and then we adjust. We learn. We adjust. Eventually we figure out the most efficient method of doing our business.

I’m all for allowing the nominal pain of the learning and adjusting for a better future society which takes full responsiblity for its health care and gets both business and government the heck out of it. But then, that’s my philosophy.
 
Written By: McQ
URL: http://www.qando.net/
I’m predisposed to liking HSA’s but I’m wondering how the transition affects those with pre-existing conditions - unless I’ve missed it here.
That’s one of the tougher but transitory issues in this debate. I say transitory because when conditions like that develop within a system of HSAs they’re no longer "pre-existing". You’ll pay out of the HSA and if necessary tap into the HDHP.

As for those who have them I have no problem putting them in a program like Medicare with a level of means testing until the current generation of patients with pre-existing conditions no longer exist. Grandfather them in.

As you note portability will be taken care of by HSAs, and, eventually pre-existing conditions will no longer be a useful term.
 
Written By: McQ
URL: http://www.qando.net/
I might be one of the few people on this thread that has worked on the front lines of healthcare selling HSA and traditional plans to companies and individuals. I have specialized in HSAs since they were established two years ago.

I don’t care much for critics, or surveys. I like to deal in reality and what I see on a day to day basis. And since I have had many (+2000) clients on HSA plans for two years, I can say one thing, HSAs do work. Here are a few FACTS,

Our clients are only spending 30% of their contributions,

Most of our clients are above the age of 40 and not healthy or wealthy!

We have not had one client that switched from a HSA plan go back to a traditional plan.

Of all the clients that came to us without insurance, not one client has dropped their HSA plan.

For the last two years, I have designed a financial model that compares HSA plans to traditional plans. I found that HSAs are incredible for healthy people (no surprise) However, i also found that HSAs are really good if you are unhealthy.

I know this is true in the real world because so many older, unhealthy people are coming to us for HSA plans and dropping their traditional plans. I also see how much money they are saving! By the end of this week I will put some real life examples on our website that should explain why a HSA is a better choice for 80% of the public.


Pre-exisiting Conditions

When we work with a company, they typically offer their employees a option: Either a HSA plan or a traditional plan is offered. Even if a person has a pre-existing condition and is on a traditional plan, he can switch into a HSA plan with no loss in coverage. He can also switch back into a traditional plan if he was in a HSA plan.

Deductibles

IF I could hammer home one point, do not analyze or compare health plans solely on deductible. Take a close look at out of pocket max. and co-pays. IN fact, deductible is one of the last things I look at when comparing plans.

Knowledge

I agree with one posting, its hard to find anyone that really understands how HSAs work or who know the rules and regulations. Almost every article I read on HSAs, contains 2-3 factual errors. I can’t even begin to explain the misinformation that is being provided by HSA providers. The larger one;s are the worst! I would say there are less then 50 people in the entire USA that really understand HSAs. I am seriously amazed that so many have been sold.
 
Written By: J Snyder
URL: http://greatlakeshsa.com
So we took the Basic plan offered by the former employer and skipped the HSA. We are 65 and 62. The premium for Basic is $40 per month, a bit less than Auto or Homeowner policies.

If Auto of Homeowner policies followed the same model as most Health policies, no one could afford them either. Need an oil change? Sign this paperwork. The co-pay will be $20. Our Usual Customary Reasonable charge for an oil change is $80, which we will bill to you insurance carrier.

The costs for processing all the paperwork involved in claims gets eliminated in the high-deductible plans. Also eliminated are the "oil change" visits to the doctor and the common maintenance pills and potions. What is left is catastrophic loss coverage, the classic meaning of insurance and the meaning behind your Homeowner and Auto policies.

The HSA is a nice supplement with some tax implications, but the big news is the high-deductible catastrophic coverage.

An economist might look at the $250 or $500 deductible for coverage on a $30,000 auto or a $300,000 home and make a comparison to the $5,000 deductible on catastrophic health coverage.
 
Written By: Tee Jay
URL: http://
The marginal cost of processing a $100 claim and a $1 million claim are the same. Getting most of the $100 claims to go away will save everyone money. Routine medical care should be paid out of pocket. Given the competitive forces, this will change medical care for the better, even if "costs" do not drop.

In the current system, a physician is a fool if he doesn’t price services such that it maxes out the reimbursement, which is usually half of the nominal charge. In the bad old days, getting paid was a real hassle. Now with electronic billing, you generally will get paid within 30 days of filing a clean claim. Medicare and Medicaid require physicians to file all claims, even those that the physicians know in advance will not be paid. And to top that off, you must vigorously attempt to collect the co-pays and deductibles upon pain of being charged with filing false claims and/or insurance fraud (the two charges are not the same).

One of the main ways that we are a wealthier nation is that medical care is in such high demand and works as well as it does. Government single pay medical system deal with the demand by time rationing and hoping people die before major money gets spent on the patient.

The big bucks in medical care generally get spent on the last 6 months of a patient’s life. Some of that can be very expensive. My disabled veteran brother-in-law lived 6 years after suffering from cancer complicated by a superior mesenteric artery infarction. The cancer treatment and the aftermath of the infarction left him with 30 centimeters of intestine. He had to be fed intravenously. By the end of his life his care cost $100,000 a month, and the VA had to be wrestled with over every single thing that was done. The main reason he lived as long as he did was because he was kept out of the VA medical facilities. Had it been up to the VA, he would not have lived 6 months, and yes, his living 6 years was worth every penny it cost. I often tell people that the government won’t take care of the vets properly, so what makes you think that they’ll take care of you properly.
 
Written By: Charles D. Quarles
URL: http://spaces.msn.com/members/cdquarles/
Let’s try a real world example. A certain employer currently offers a HMO type plan for $189/mo. to individual employees and $297/mo. for a family, to both current employees and to retirees. The employer is obviously subsidizing the premium. The employer, wanting to trim costs decides to start offering HSA’s as an alternative. The employer agrees to cover the entire premium for the HDHP ($1000 indv. ded./$2000 family, $5000 indv. out of pocket, $10,000 family with 80/20 coverage after the deductible). The employer also decides to further entice employees to take the HSA, they will deposit $500/yr. into the account. The rest is up to the employee. Sounds good, huh? Or is it? If the single employee deposits $200 a month, that only comes to a total of $2900 in year one. If the employee with a family deposits $300, that comes to $4100.

If either the single or the family has normal annual health care expenses (including prescriptions in most cases) that exceed $10,500 single or $12,500 family, they are going to be paying even more out of pocket, perhaps a lot more. People with heart, lung, or neurological disorders will often spend $500+ a month on prescriptions alone, and see a doctor as frequently as once a month ($100 for a normal visit). Tests will often be required 2 to 4 times a year, at rates of anywhere from $100-$500. Those expenses alone could run in excess of $8200. That doesn’t leave much room for any emergencies, hospitalization, or injury. Even assuming the best, it doesn’t give them much of a chance to build up a balance year over year to save up for a more catastrophic event. This scenario could be even worse for retirees.

In short HSA’s are not such a good choice for these folks. However if they stay in their traditional plans, two things will work against them. First, the employer is not likely to continue subsidizing the premium at the same rate they used to, causing prices to effectively go up. Second, as much of the ’good risk’ will leave the program for the HSA, the insurer will have to raise rates to keep the program solvent.

It’s a catch 22 for these people. Proponents can say that it’s a choice, and that people have to take responsibility, but the fact is that the system is imperfect, both as it is and the HSA.

The biggest problem for HSA’s is that many of the people hurt by them will likely fall into two ’protected classes’, those of the disabled and seniors. I’d be willing to wager that there are already scores of lawyers out there licking their chops for the opportunity to lay a class action suit against some big employer and insurer that implements an HSA program that disadvantages their disabled and senior employees and retirees.

So which is more likely to happen... People plan better for their futures, take responsibility, and we see health care prices drop sharply from competition? Or does my scenario play out, and we only end up adding to the coffers of the high priced attorneys? I know it sounds cynical, but be honest, the former is just too optimistic.
 
Written By: Pete
URL: http://

 
Add Your Comment
  NOTICE: While we don't wish to censor your thoughts, we do blacklist certain terms of profanity or obscenity. This is not to muzzle you, but to ensure that the blog remains work-safe for our readers. If you wish to use profanity, simply insert asterisks (*) where the vowels usually go. Your meaning will still be clear, but our readers will be able to view the blog without worrying that content monitoring will get them in trouble when reading it.
Comments for this entry are closed.
Name:
Email:
URL:
HTML Tools:
Bold Italic Blockquote Hyperlink
Comment:
   
 
Vicious Capitalism

Divider

Buy Dale's Book!
Slackernomics by Dale Franks

Divider

Divider